RELATED COMPANIES

x

Loading data...

x

Loading data...

ChartsValuation & Peer ComparisonCommunity Buzz

Close ✕

BANGALORE/MUMBAI: Government-owned airline Air India has, after much hemming and hawing, found a business process outsourcing partner in Sutherland Global Services even as many other potential bidders avoided the five-year contract because the terms were exacting.

Air India postponed its tender by six months to December-end and introduced three amendments to the first draft around November before sealing the about $100 million (Rs 535 crore) deal with US-based Sutherland early this month, according to sources with direct knowledge of the development.

Major BPOs, such as Servion, Serco Global Services, Aegis and Wipro BPO that Air-India invited to bid for the contract, had hesitated to take part in the bidding after going through the terms and conditions, said the sources.

Among other things, the BPOs were put off by the thin margins on offer, the financial condition of the loss-making airline and risks associated with taking up government-related contracts, especially after the recent Commonwealth Games in New Delhi, where all contracts are coming under the microscope to check for potential fraud.

"In this space any business that brings less than average margin could pull down the company's performance," said Sanjay Dhawan, executive director of PwC India. "So, in a typical $100 million deal, where the vendor is making half the average margin, they would need to grow the business four times to reach the level."

The five-year contract with Sutherland, which recently bought the healthcare BPO of Chennai-based Apollo Hospitals for 1,000 crore, will replace a three-year deal with InterGlobe Technologies-part of the group that runs Indigo Airlines-that ran its course. AI was said to be looking for a partner that did not have a close link to a rival.

"A lot of times, companies get concerned about the security of passenger data and efficiency in the system," said Dhawan. "Also, a new contract with a new vendor gives an opportunity to the client to evaluate the existing contract by bringing cost-savings and efficiency."

According to the sources, the new deal is on a full-time equivalent basis of up to 600 seats.